Regulations

The US Department of Labor unveiled its new proposal for updating overtime regulations last Thursday, offering a version of the rule that would expand overtime eligibility to more employees, but millions fewer than the one the Obama administration attempted to enact in 2016. The proposed rule raises the salary threshold at which executive, administrative, or professional employees become exempt from overtime requirements from $23,660 to $35,308: higher than many businesses expected but a far cry from the $913 per week, or $47,476 per year, set by the previous administration, Proskauer attorney Allan Bloom notes in a blog post summarizing the finer points of the proposal. Up to 10 percent of that minimum can be satisfied through non-discretionary bonuses, incentives, or commissions, or through “catch-up” payments made at the end of the year, which effectively reduces the weekly minimum further.

Another exemption for highly compensated employees would increase from $100,000 to $147,414, which is actually higher than the Obama administration’s threshold of $134,004. The new proposed figure equates to the 90th percentile of full-time salaried workers nationally, projected forward to 2020. Employees are exempt from overtime if they meet this higher level of compensation as long as they are primarily engaged in office work and regularly perform at least one of the duties of an executive, administrative or professional employee. If the proposed rule comes into force as written, employers of workers who are no longer exempt based on their level of compensation will have to decide whether to pay them overtime or bump their salaries up over the threshold. “Paying overtime on $125,000 per year is a huge economic burden, but it still may be less expensive than going to the new level,” Seyfarth Shaw attorney Alexander Passantino tells Lisa Nagele-Piazza at SHRM.

One feature of the Obama-era rule, subsequently struck down by a federal judge in 2017 before coming into effect, to which employers objected was its scheme for automatically increasing the threshold every three years based on inflation. This was intended to ensure that lack of legislative or regulatory action did not result in an outdated minimum: The threshold had not been updated since 2004, which was the first change since 1975. The new proposal does not include automatic increases. Instead, the notice of proposed rule-making expresses the department’s “intention to propose updates to the earnings thresholds every four years. This would provide clarity and help workers and employers by having a regular and orderly process for future changes.”

The new proposal also does not change the duties tests for overtime eligibility, Ryan Mick, an attorney with Dorsey & Whitney in Minneapolis, tells SHRM’s Allen Smith, which “would have required many employers to undertake a far more complex analysis to determine exempt status for many employees.” Still, it may be a good time for employers to make sure their exempt employees meet the existing criteria:

The “fiduciary rule”, an Obama-era regulation that would require financial advisors to act in their clients’ best interests when recommending retirement savings plans, has been targeted for removal or reform by US President Donald Trump’s administration since February, when Trump ordered the Department of Labor to review the rule and possibly revise or remove it. The deadline for compliance with the regulation was originally April 10, but the department proposed delaying it by 60 days last month to give it time to complete the review. On Wednesday, the department confirmed that the new compliance deadline will be June 9, according to CNBC:

Legal experts said the Labor Department’s announcement still keeps intact the core of the regulation. Among those are requirements that advisors charge no more than reasonable compensation, avoid misleading statements and act in your best interest when recommending investments. “The DOL is effectively regulating IRAs,” said Marcia Wagner, managing director at The Wagner Law Group in Boston. “This is the DOL saying that this isn’t up for debate.” …

Other portions of the regulation concerning specific written disclosures advisors and financial services firms must make to clients won’t take effect until Jan. 1, 2018, according to the DOL’s post on the Federal Register.

The resolutions of disapproval reached the president’s desk through the Congressional Review Act, a rarely used tool that allows Congress to fast-track a bills to reverse regulations. Before Trump, the law had been used successfully only once in its 21-year history.

Trump has now signed a total of seven, a pace that has surprised even experts. “There are several that weren’t on my radar at all,” said Susan Dudley, director of the Regulatory Studies Center at George Washington University. … Trump’s action effectively precludes federal action on any of those rules, since the administration is now barred from issuing any new rule that is “substantially similar” to the ones that were just overturned.

Republican leadership in the US House of Representatives on Monday unveiled their long-awaited proposal for repealing and replacing the Affordable Care Act. The American Health Care Act, as the replacement plan is titled, would abolish some of the central provisions of the ACA, according toPolitico:

The Republican bill gets rid of individual mandate – the least popular part of ACA but a linchpin of the coverage expansion. It preserves Obamacare’s requirement that insurers accept everyone regardless of pre-existing conditions but allows insurance companies to charge a 30 percent surcharge if consumers don’t keep “continuous” insurance coverage.

Republicans would replace Obamacare subsidies with new age-based tax credits ranging from $2,000 to $4,000 to help individuals pay for coverage. The credits would begin phasing out for people who make more than $75,000 for individuals and $150,000 for households. They would disappear completely for individuals who earn more than $215,000, with a cap of $290,000 for joint filers. The plan unveiled Monday would freeze Medicaid’s expansion in 2020 and phase it out over time. Nationwide, more than 11 million people got Medicaid through the expansion under Obamacare.

The bill effectively repeals or significantly delays taxes associated with the ACA. While the bill does not repeal the “Cadillac tax” on premium employer-provided health plans, it delays implementation of the tax until 2025. The House GOP ultimately decided against putting a cap on the tax exclusion for employer-provided health insurance, which business groups and Democrats alike had decried as effectively imposing new taxes on health care.

Health law expert Timothy Jost examines the bill in detail at Health Affairs, observing that, among other things, the bill removes the penalties associated with the employer and individual mandates, but not the mandates themselves. Also, it does not remove the ACA’s employer reporting requirements:

US President Donald Trump signed two executive orders on Friday: one ordering a review of regulations imposed on the financial sector under the Dodd-Frank Act of 2010, and the other ordering a review of the “fiduciary rule,” which requires financial advisors to act in their clients’ best interests when advising them about retirement, NPR reports:

These executive actions are the start of a Trump administration effort to reverse or revise financial regulations put in place by the Obama administration and seen by Trump and his advisers as onerous and ineffective. …

Echoing arguments of the financial services industry, the Trump administration official said the [fiduciary] rule would have unintended consequences if allowed to go forward. The industry says the rule will make it harder for advisers to serve lower-income clients. Backers of the rule say it will prevent advisers from gouging customers by selling them inappropriate, high-fee products. Once the review is complete, the official said, it’s possible the Labor Department could determine the rule is completely unnecessary.

The Trump team has had their sights on the fiduciary rule, drawn up by the Labor Department last April, for a while, and the business community had lobbied the president to rescind it. Friday’s order does not immediately cancel the rule, but gives the department the discretion to revise or discard it and prevents the rule from taking effect as scheduled on April 10.

A senior Trump administration official tells the Wall Street Journal that Friday’s orders are just the start of the administration’s deregulation agenda:

The fate of the US Labor Department’s controversial new overtime rule, which would raise the salary threshold at which employees are exempt from overtime pay from $23,660 to $47,476, remains uncertain after a federal judge blocked it from coming into effect in December. In New York State, however, which has an overtime rule of its own, the overtime salary threshold increased at the turn of the new year, Rosa Goldensohn reports at Crain’s:

New York employers had been required to pay overtime to employees making up to $675 a week, or roughly $35,000 a year, rules that do not apply to farm laborers, babysitters and many white-collar workers, among others. But on Dec. 28—and with very little fanfare—the state Department of Labor hiked that ceiling to $787.50 a week, or around $40,000 a year, for businesses with 10 or fewer workers, and $825 weekly or $42,000 annually for those with more than 10, a new threshold that went into effect Dec. 31.

Even as federal workplace regulations are set to become more employer-friendly under president-elect Donald Trump, the state and local level tells a different story. For instance, the Wall Street Journal’s Eric Morath points out, a whopping 19 states raised their minimum wages at the start of the new year, which the Economic Policy Institute estimates will give 4.3 million low-wage workers a raise:

In Massachusetts, the minimum wage will rise $1, to $11 an hour, affecting about 291,000 workers. In California, the minimum goes up 50 cents, to $10.50 an hour, boosting pay for 1.7 million people. Wages are also going up in many Republican-led states, where politicians have often been skeptical of the benefits of minimum-wage increases. In Arizona, one out of every nine workers is set to receive a wage increase—a move firms are challenging in court. So will tens of thousands of workers in Arkansas, Michigan and Ohio, all states that backed GOP President-elect Donald Trump in November.

Trump’s choice for labor secretary, fast food executive Andrew Puzder, is an outspoken critic of mandatory wage floors and other employment regulations, much to the dismay of activists seeking a significant increase in the federal minimum wage. Voters in several states approved referenda in November raising the minimum wage, however, and action is also happening at the level of cities, a trend kicked off by Seattle in 2014: New York City’s minimum wage will increase to $15 an hour by the end of 2018, and Washington, DC, plans to do the same by 2020.